FCS Advisors, LLC v. State of Missouri, 070919 FED8, 17-3533

Docket Nº:17-3533
Opinion Judge:Stras, Circuit Judge.
Party Name:FCS Advisors, LLC; Brevet Direct Lending - Short Duration Fund, L.P. Plaintiffs - Appellants v. State of Missouri; Douglas Nelson Defendants - Appellees
Judge Panel:Before SMITH, Chief Judge, BENTON and STRAS, Circuit Judges.
Case Date:July 09, 2019
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

FCS Advisors, LLC; Brevet Direct Lending - Short Duration Fund, L.P. Plaintiffs - Appellants


State of Missouri; Douglas Nelson Defendants - Appellees

No. 17-3533

United States Court of Appeals, Eighth Circuit

July 9, 2019

Submitted: February 12, 2019

Appeal from United States District Court for the Western District of Missouri - Jefferson City

Before SMITH, Chief Judge, BENTON and STRAS, Circuit Judges.

Stras, Circuit Judge.

An investor loaned $20 million to EngagePoint, Inc., which was the prime contractor on a major software project for the State of Missouri. When Missouri terminated the contract and EngagePoint was unable to repay its debts, the investor sued and claimed that Missouri had fraudulently induced the loan and illegally discriminated against EngagePoint. The district court1 dismissed the lawsuit, and we affirm.


Missouri hired EngagePoint, a minority-owned information-technology company, to redesign the software for its health-benefits programs. Douglas Nelson, the Commissioner of Missouri's Office of Administration at the time, managed the project, which had an estimated cost of $147 million financed through a combination of state and federal funds.

When EngagePoint's costs ballooned, Nelson allegedly encouraged the company to do something to improve its cash flow. Acting on this advice, EngagePoint turned to Brevet Direct Lending - Short Duration Fund, L.P. and its administrative agent, FCS Advisors, LLC (together, "Brevet"), for a loan. Brevet is a private lender engaged in so-called "impact lending," which focuses on promoting social or environmental objectives such as, in this case, supporting a minority-owned business.

Before making the loan, Brevet held a conference call with Nelson, who allegedly "led [Brevet] to believe, in words or substance," that he was pleased with EngagePoint's work and that the company was likely to continue to serve as the prime contractor through the end of the project. Shortly after the call, Brevet approved the loan.

Just days later, however, EngagePoint's role diminished. And within months, Missouri terminated EngagePoint altogether, refused to pay the company for its past work, and found a new prime contractor. This sequence of events left the company unable to repay its loan and Brevet looking for a way to recoup its losses.

Brevet sued Nelson and the State of Missouri in federal district court based on two theories. The first was that Nelson fraudulently induced it into making what turned out to be an ill-advised loan. The second was that Nelson's alleged racial animus toward EngagePoint's "Asian-Indian American management" led to the company's termination, which violated federal anti-discrimination laws. The district court rejected both theories and dismissed Brevet's complaint.


We review the dismissal de novo, "accepting as true the allegations . . . and drawing all reasonable inferences in favor of the nonmoving party." Star City Sch. Dist. v. ACI Bldg. Sys., LLC, 844 F.3d 1011, 1016 (8th Cir. 2017). To survive a motion to dismiss, the complaint had to contain "sufficient factual matter" to state a facially plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The fraudulent-inducement claim had to be pleaded with particularity, including "the who, what, where, when, and how of the alleged fraud." Mitec Partners, LLC v. U.S. Bank Nat'l Ass'n, 605 F.3d 617, 622 (8th Cir. 2010) (citation omitted); see also Fed. R. Civ. P. 9(b) (requiring fraud to be pleaded with particularity).


We begin there. Brevet alleges that Nelson fraudulently induced the loan by leading Brevet to "believe, in words or substance," that EngagePoint would remain through the end of the project. According to the complaint, Nelson had a different plan, which was to terminate EngagePoint, and induced Brevet to complete the loan to protect Missouri's financial interests.

Absent from the complaint, however, are any false representations of material fact. See Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758, 765 (Mo. banc 2007). The closest it comes is the allegation that Nelson "led [Brevet] to believe" that "EngagePoint was performing well" and would "likely . . . continue working on Phases II and III [of the project] so long as its access to liquidity improved." But these are, at most, mere expressions of Nelson's opinion or predictions of the future, not statements of material fact. See Clark v. Olson, 726 S.W.2d 718, 719-20 (Mo. banc 1987) ("[E]xpressions of opinion are insufficient to authorize a recovery for fraudulent misrepresentation . . . ."); Arnold v. Erkmann, ...

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